<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-8714
TAMBRANDS INC.
--------------
(Exact name of registrant as specified in its charter)
Delaware 13-1366500
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
777 Westchester Avenue, White Plains, New York 10604
- ---------------------------------------------- -----
(Address of principal executive offices) (Zip code)
Registrant's telephone number,
including area code (914) 696-6000
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, par value $.25 per share: 36,831,421 shares
as of April 30, 1996
Index to Exhibits is set forth at page 10.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
- ----------------------------
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Earnings and Retained Earnings
Three Months Ended March 31, 1996 and 1995
(in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------------------------------
1996 1995
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<S> <C> <C>
Net sales $168,989 $166,947
Cost of products sold 55,841 55,304
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Gross profit 113,148 111,643
Selling, administrative and general expenses:
Marketing, selling and distribution 60,453 58,684
Administrative and general 13,482 13,715
-------------- --------------
73,935 72,399
-------------- --------------
Operating income 39,213 39,244
Interest, net and other (2,117) (2,434)
-------------- --------------
Earnings before provision for income taxes 37,096 36,810
Provision for income taxes 13,466 13,988
-------------- --------------
Net earnings 23,630 22,822
Retained earnings at beginning of period 476,252 457,071
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499,882 479,893
-------------- --------------
Dividends 16,935 16,144
Net issuance of treasury stock 832 (12)
-------------- --------------
17,767 16,132
-------------- --------------
Retained earnings at end of period $482,115 $463,761
============== ==============
Net earnings per share $0.64 $0.62
============== ==============
Dividends per share $0.46 $0.44
============== ==============
Average shares of Common Stock
outstanding during the period 36,775 36,685
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<PAGE>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995
(in thousands)
<TABLE>
<CAPTION>
1996
(Unaudited) 1995
------------ ------------
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and cash equivalents $9,388 $11,135
Accounts receivable, less allowance
for doubtful accounts of $1,642
in 1996 and $1,667 in 1995 108,999 98,047
Inventories:
Raw materials 14,413 17,952
Finished goods 33,506 28,784
------------ ------------
47,919 46,736
Deferred taxes on income 18,257 17,724
Prepaid expenses and other current assets 24,516 26,271
------------ ------------
Total current assets 209,079 199,913
Property, plant and equipment 357,802 353,429
Less accumulated depreciation (142,674) (137,307)
------------ ------------
215,128 216,122
Intangible and other assets 5,914 6,014
------------ ------------
Total assets $430,121 $422,049
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Short-term borrowings $62,515 $55,063
Accounts payable 42,262 48,498
Accrued expenses 71,164 73,330
Taxes on income 38,176 27,078
------------ ------------
Total current liabilities 214,117 203,969
Medium-term obligations 70,458 80,889
Deferred taxes on income 22,843 22,537
Postemployment benefits 11,464 11,682
------------ ------------
Total liabilities 318,882 319,077
Shareholders' equity:
Common Stock 10,887 10,887
Retained earnings 482,115 476,252
Cumulative foreign currency translation adjustment (16,037) (14,223)
Treasury stock (363,554) (368,543)
Unamortized value of restricted stock and pension costs (2,172) (1,401)
------------ ------------
Total shareholders' equity 111,239 102,972
------------ ------------
Total liabilities and shareholders' equity $430,121 $422,049
============ ============
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<PAGE>
TAMBRANDS INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net earnings $23,630 $22,822
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 7,007 6,058
Deferred income taxes (108) 718
Litigation charge (151) --
Restructuring and other charges (244) (1,429)
Change in:
Accounts receivable (11,861) (1,232)
Inventories (1,664) (6,854)
Prepaid expenses and other current assets 1,785 3,601
Taxes on income 11,717 8,558
Accounts payable and accrued expenses (8,214) (8,728)
------------ ------------
Net cash provided by operating activities 21,897 23,514
------------ ------------
Cash Flows from Investing Activities:
Capital expenditures (7,200) (8,034)
Proceeds from sales of property, plant
and equipment 34 580
------------ ------------
Net cash used in investing activities (7,166) (7,454)
------------ ------------
Cash Flows from Financing Activities:
Payment of dividends (16,935) (16,144)
Short-term debt changes (2,662) (3,004)
Reduction of medium-term obligations (215) --
Proceeds from exercise of stock options and other 3,301 558
------------ ------------
Net cash used in financing activities (16,511) (18,590)
------------ ------------
Effect of exchange rate changes on cash 33 (452)
------------ ------------
Net decrease in cash and cash equivalents (1,747) (2,982)
Cash and cash equivalents at beginning of period 11,135 13,876
------------ ------------
Cash and cash equivalents at end of period $9,388 $10,894
============ ============
</TABLE>
See accompanying notes to consolidated financial statements on page 5.
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<PAGE>
Notes to Consolidated Financial Statements
- ------------------------------------------
1. The financial statements reflect all adjustments that, in the opinion of
management, are necessary for a fair presentation of the information
contained therein, and are subject to audit and adjustment at the end of
the fiscal year, with the exception of the Consolidated Balance Sheet at
December 31, 1995, which has been derived from the audited financial
statements at that date.
Item 2. Management's Discussion and Analysis of Financial
- ------- --------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operations
- ---------------------
First-quarter Net sales of $169.0 million represents a 1% increase over the same
period of 1995. This increase was primarily due to a favorable product mix
resulting principally from a lower count bonus pack consumer promotion in the
United States, higher priced new products and selective price increases in
certain international markets, partially offset by lower unit volumes primarily
in the United States and Latin America.
Gross profit as a percentage of Net sales was 67.0% for the first quarter versus
66.9% for the corresponding period of 1995. The higher margin is primarily
attributable to improvements in product mix and pricing and continuing
productivity efficiencies, partially offset by higher material costs.
Marketing, selling and distribution expenses were 3% above the first quarter of
1995. The higher spending levels principally reflect promotional support of the
relaunched Tampax flushable line and the launch of Naturals in the United
States, and the launch of a non-applicator tampon in France. Advertising was
lower in the United States due to a high prior year comparison resulting from
support of the Satin Touch product launch.
Administrative and general expenses were 2% lower than last year primarily as a
result of management's continuing efforts to contain overhead costs. A reduction
in the United States was partially offset by higher costs in Russia and Ukraine.
Operating income was flat versus the first quarter of 1995 due to higher Net
sales and profit margin and lower administrative and general expenses, offset by
higher marketing, selling and distribution expenses as discussed above.
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<PAGE>
Interest, net and other reflected a $.3 million decrease in expense from the
comparable period of the prior year. The decrease is primarily due to realized
foreign exchange losses in 1995 for which there were no corresponding losses in
the current year.
The three months' effective tax rate was 36% versus 38% in the same period of
1995. The lower effective tax rate was principally due to the additional
utilization of foreign tax credits in the current year.
Earnings per share for the first quarter were $.64 compared to $.62 in the
corresponding period of 1995.
Outlook
- -------
The Company anticipates that the worldwide market for consumer products will
continue to be highly competitive and sensitive to price. However, management
will continue to evaluate price increase opportunities as appropriate. The
Company expects the current high level of advertising and promotional activities
and new product introductions by competitors to remain strong, along with
continued activity in the private label sector.
During the first quarter and continuing into the early part of the second
quarter, the U.S. tampon category in units remained relatively flat versus the
same period of the prior year. Similarly, Tampax market share in the United
States was below the comparable period of 1995 primarily due to strong
competitive activity. The Company intends to proceed with its aggressive support
of the Tampax tampon franchise with heightened levels of advertising and
promotional activities and product line extensions in the United States and
international markets.
The cost of manufacturing continues to be impacted by the prior escalation of
raw material and packaging costs. The Company intends to proceed with
productivity initiatives to help mitigate the effect of these cost increases.
Based on the current downward trend of pulp and paper prices, management expects
these costs to moderate somewhat through the latter part of 1996 and the first
part of 1997.
Financial Condition
- -------------------
At March 31, 1996, there was a working capital deficit of $5 million compared to
a deficit of $4.1 million at the prior year end. Cash flows from operating
activities in the first quarter were $21.9 million versus $23.5 million in 1995.
The reduction in cash flows from operating activities is primarily attributable
to higher accounts receivable resulting from high March sales, partially offset
by a smaller incremental increase in inventory levels and the timing of tax
payments.
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<PAGE>
Capital expenditures of $7.2 million represent the Company's continued
investment in equipment to improve product quality and productivity, modernize
production facilities, and manufacture and launch new products. The spending
levels in 1996 are expected to approximate those of 1995.
The Company anticipates that its future cash requirements will be met by its
cash flows from operations and the ability to borrow from a variety of sources.
At March 31, 1996, total Shareholders' equity was $111.2 million compared with
$103.0 million at December 31, 1995. The net increase in Shareholders' equity
is primarily due to the $5.9 million growth of Retained earnings.
Information Concerning Forward-Looking Statements
- -------------------------------------------------
Statements contained in this Quarterly Report other than matters of historical
fact are forward-looking statements, and are made based on management's
expectations and beliefs concerning future developments and their potential
effect on the Company. There can be no assurance that future developments will
be in accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management. Among the
factors that could cause actual results to differ materially from such forward-
looking statements are the following:
- the market reception given the Company's new products, including
TAMPAX NATURALS;
- competitive pressures, including new product developments or increased
advertising or promotional activity by existing or new competitors or
growth in the private label tampon segment;
- changes in the market for raw or packaging materials, which could
impact the Company's manufacturing costs;
- changes in the pricing of the products of the Company or its
competitors;
- changes in consumer preferences affecting the usage of tampons;
- the loss of a significant customer;
- the costs and uncertainties associated with implementation of actions
resulting from the Company's ongoing evaluation of its business
strategies and organizational structures;
- production delays or inefficiencies;
-7-
<PAGE>
- the costs and other effects of legal and administrative cases and
proceedings, settlements and investigations;
- real or perceived safety or quality issues with respect to the
Company's products, whether arising from tampering or otherwise; and
- changes in U.S. or international economic or political conditions,
such as inflation or fluctuations in interest or foreign exchange
rates.
While the Company periodically reassesses material trends and
uncertainties affecting the Company's results of operations and financial
condition in connection with its preparation of management's discussion and
analysis of results of operations and financial condition contained in its
quarterly and annual reports, the Company does not intend to review or revise
any particular forward-looking statement in light of future events.
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<PAGE>
PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
- ------- -----------------
The Company or a subsidiary is a defendant in a small number of product
liability lawsuits based on allegations that toxic shock syndrome ("TSS") was
contracted through the use of tampons. A small number of pre-suit claims
involving similar TSS allegations have also been asserted. The damages alleged
vary from case to case and often include claims for punitive damages.
The Company and three of its former officers were named as defendants in certain
shareholder lawsuits filed in 1993 in the United States District Court for the
Southern District of New York and consolidated under the caption In Re Tambrands
---------------
Inc. Securities Litigation. The parties stipulated to the certification of the
- --------------------------
consolidated lawsuit as a class action on behalf of all purchasers of the
Company's common stock during the period December 14, 1992 through April 28,
1993. The complaint alleged that the Company's disclosures during the class
period contained material misstatements and omissions concerning its anticipated
future earnings and thereby allegedly violated Section 10(b) and Rule 10b-
5 of the Securities Exchange Act of 1934. In November 1995, the court approved
a settlement of this litigation and dismissed the action against all defendants.
The Company was a nominal defendant in three purported shareholder derivative
lawsuits filed in the Supreme Court of the State of New York for Westchester
County and consolidated in October 1993 into a single action. Named collectively
in the consolidated complaint as individual defendants were the Company's
directors (other than Mrs. Busquet, Mr. Fogarty and Mrs. Hill), certain former
directors and three of its former officers. The complaint alleged that the
officer-defendants exposed the Company to liability in the shareholder class
action described in the preceding paragraph and misappropriated corporate
opportunities by trading in the Company's stock on the basis of nonpublic
information. One of the former officers was also alleged to have received
improper reimbursements from the Company for alleged personal expenses. The
director-defendants were alleged to have acquiesced in the aforesaid alleged
violations and to have received excessive compensation. The complaint sought to
recover on behalf of the Company an unspecified amount of damages from the
individual defendants. No relief was sought against the Company. In September
1994, the Court granted defendants' motion to dismiss the complaint for failure
to make a demand upon the Board of Directors. In April 1996, this ruling was
affirmed by the Appellate Division for the Second Department.
- 9 -
<PAGE>
The Company is involved, either as a named defendant or as the result of
contractual indemnities, in certain litigation arising out of the operations of
certain divested subsidiaries.
There are certain other legal proceedings pending against the Company arising
out of its normal course of business in which claims for monetary damages are
asserted.
While it is not feasible to predict the outcome of these legal proceedings and
claims with certainty, management is of the belief that any ultimate liabilities
in excess of provisions therefor will not individually or in the aggregate have
a material adverse effect on the Company's financial position or results of
operations.
Items 2, 3, 4 and 5 of Part II have been omitted since either the Company's
response to the Item would be negative or the Item is inapplicable.
Item 6. Exhibits and Reports on Form 8-K
- ------ --------------------------------
a) Exhibits
--------
Exhibit
Number Description
------- ------------
3(1) Certificate of Incorporation of the Company, as amended
through April 28, 1987, filed April 30, 1987 as Exhibit
4(a) to the Company's Form S-8 Registration Statement
(Reg. No. 33-13902), incorporated herein by reference.
3(2) Certificate of Amendment of Certificate of Incorporation
of the Company, dated April 24, 1990, filed May 15, 1990
as Exhibit 4(2) to the Company's Report on Form 10-Q for
the quarter ended March 31, 1990, incorporated herein by
reference.
3(3) Certificate of Amendment of Certificate of Incorporation
of the Company, dated April 28, 1992, filed May 15, 1992
as Exhibit 4(2) to the Company's Report on Form 10-Q for
the quarter ended March 31, 1992, incorporated herein by
reference.
- 10 -
<PAGE>
Exhibit
Number Description
------- --------------------
3(4) By-Laws of the Company, as amended, filed March 31, 1995
as Exhibit 3(4) to the Company's Report on Form 10-K for
the year ended December 31, 1994, incorporated herein by
reference.
4(1) Description of the rights of security holders set forth
in the Certificate of Incorporation of the Company, as
amended through April 28, 1987, filed April 30, 1987 as
Exhibit 4(a) to the Company's Form S-8 Registration
Statement (Reg. No. 33-13902), incorporated herein by
reference.
4(2) Description of the rights of security holders set forth
in the Certificate of Amendment of Certificate of
Incorporation of the Company, dated April 28, 1992,
filed May 15, 1992 as Exhibit 4(2) to the Company's Form
10-Q Report for the quarter ended March 31, 1992,
incorporated herein by reference.
4(3) Rights Agreement between the Company and First Chicago
Trust Company of New York, as Rights Agent, dated as of
October 24, 1989, which includes the Form of Right
Certificate as Exhibit A and the Summary of Rights to
Purchase Common Shares as Exhibit B, filed October 27,
1989 as Exhibit 1 to the Company's Form 8-A Registration
Statement, incorporated herein by reference.
4(4)(a) Indenture dated as of December 1, 1993 between the
Company and Citibank, N.A., as trustee, relating to the
Company's Medium-Term Note Program, filed March 31, 1994
as Exhibit 4(4)(a) to the Company's Form 10-K Report for
the year ended December 31, 1993, incorporated herein by
reference.
4(4)(b) Form of Floating Rate Debt Security, filed December 16,
1993 as Exhibit 4-a to the Company's Report on Form 8-K,
incorporated herein by reference.
4(4)(c) Form of Fixed Rate Debt Security, filed December 16,
1993 as Exhibit 4-b to the Company's Report on Form 8-K,
incorporated herein by reference.
- 11 -
<PAGE>
Exhibit
Number Description
------- -----------
12 Computation of Ratio of Earnings to Fixed Charges,
filed herewith.
27 Financial Data Schedules, filed herewith (in
electronic format only).
Exhibits 2, 11, 15, 18, 19, 22, 23, 24 and 99 have been omitted as inapplicable.
b) Reports on Form 8-K
-------------------
The Company filed a Report under Item 5 of Form 8-K on February 1, 1996 in
order to file a press release, issued by the Company on January 31, 1996,
which contained the Company's fourth-quarter 1995 results.
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TAMBRANDS INC.
----------------------
(Registrant)
/s/ Susan J. Riley
-------------------------
Susan J. Riley
Senior Vice President -
Chief Financial Officer
and Authorized Signatory
Date: May 14, 1996
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<PAGE>
Tambrands Inc.
FORM 10-Q
PART II, Item 6., Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Unaudited)
The following table sets forth the Company's ratio of earnings to fixed charges
for the periods indicated.
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
(in thousands, except ratios) 1996 1995
----------- ----------
<S> <C> <C>
Earnings:
Income before income taxes $37,096 $36,810
Fixed charges 2,491 2,567
Earnings $39,587 $39,377
=========== ==========
Fixed charges:
Interest portion of operating
lease expense:
Operating lease expense $1,056 $1,447
Assumed interest factor 0.33 0.33
------------ ----------
Interest portion of operating
lease expense 348 478
Interest expense 2,143 2,089
Fixed charges $2,491 $2,567
=========== ==========
Ratio of earnings to fixed charges 15.9 15.3
=========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
QUARTER 10Q 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 9,388
<SECURITIES> 0
<RECEIVABLES> 110,641
<ALLOWANCES> (1,642)
<INVENTORY> 47,919
<CURRENT-ASSETS> 209,079
<PP&E> 357,802
<DEPRECIATION> (142,674)
<TOTAL-ASSETS> 430,121
<CURRENT-LIABILITIES> 214,117
<BONDS> 70,458
0
0
<COMMON> 10,887
<OTHER-SE> 100,352
<TOTAL-LIABILITY-AND-EQUITY> 430,121
<SALES> 168,989
<TOTAL-REVENUES> 168,989
<CGS> 55,841
<TOTAL-COSTS> 55,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,143
<INCOME-PRETAX> 37,096
<INCOME-TAX> 13,466
<INCOME-CONTINUING> 23,630
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,630
<EPS-PRIMARY> .64
<EPS-DILUTED> .64
</TABLE>
